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Belfast, Boomtime, Brexit, Border

May 12, 2017Article by Paul Avery

We listened with interest to RICS’s Mike Basquill speaking candidly about the UK residential market at the Property Investor Show a few weeks ago. One key insight from his data is that while sales volumes are slowing across the UK overall, house price growth is essentially being dragged down by the outsized influence of the capital.

The UK market looks much steadier when you exclude London, and now that private renters outnumber owner-occupiers for the first time since WWII, buy-to-let investors should seriously consider the other options on the map.

The latest RICS data highlighted Northern Ireland as the top UK region in terms of price growth expectations among local agents, closely followed by South West England. Given that Belfast is also our top pick secondary city and home to one of our current projects, we have gathered together some further updates here – and the news is mostly good.

Northern Ireland market update

Fresh figures from NICEI reveal that the Northern Irish economy grew by 2.1% in Q3 2016, largely driven by strong performance in the services sector.

Construction was another major source of growth, with activity increasing by 7% in the final quarter of last year (Department for the Economy). This was largely driven by:

  • Commercial building: Citi, Fujitsu, Seagate, Allstate, Allen & Overy, and Baker & McKenzie are all moving in, bumping up demand for office space in H1 2016 by 165% on the previous year (CBRE)
  • Hotels: Belfast’s two airports recorded their highest ever arrival figures last year, with new routes to North America via Reykjavik just added (Belfast Telegraph)
  • Student accommodation: University of Ulster will open a £250m city centre campus in 2019, catering for up to 15,000 extra students and staff (University of Ulster)

Residential construction, however, continues to lag behind with a conspicuous absence of developments in the pipeline. Yet this stubborn lack of supply is underpinning respectable price growth: the latest ONS release shows the average home value in Northern Ireland rose by 5.7% in the year to February. At £125,000, the average price is still way below most other UK regions, both relative to earnings and in general.

These are some of the reasons we believe Belfast to be one of the most promising targets for property investment in the UK. But there are always risks, and one in particular has been making news this month.

Sliding Doors

The looming question of a border between the North and the Republic of Ireland after the UK leaves the EU is rightly giving investors pause. Because it is the only part of the UK connected to another EU country by land, Northern Ireland is an acute sufferer of Brexit uncertainty. The economic and social concerns involved also carry some heavy historical baggage. But this unique position may yet work to its advantage.

Donald Tusk, the European Council President, recently announced that avoiding a hard border in Ireland is one of his three priorities for the Brexit negotiations. Given that the European Council, UK government, Northern Irish executive, and the Irish government are all explicitly opposed to the possibility of a hard border, there is no party in the forthcoming negotiations seeking that outcome.

In fact, it may offer a rare easy win for all, given the ‘flexible and imaginative solutions’ the EU has stated it will consider. One of these – eventual Irish union providing an immediate route to re-entry – is as generous under the circumstances as it is controversial.  As Fintan O’Toole put it in The Guardian last week:

‘Britain’s departure from the EU is (in principle) to be final; Northern Ireland’s is now contingent. Britain is getting a divorce; Northern Ireland is being offered a trial separation. For Britain, there is a one-way ticket; for Northern Ireland, there is an automatic right of return. The implicit offer is two unions for the price of one: unite Ireland and you reunite with Europe.’

Irish union is a decision only the people of Northern Ireland can make, and it is not under serious consideration at this point. But whether it happens and Northern Ireland seamlessly transitions into the EU, or the country remains in the UK with a flexible solution on borders (which the EU’s heartfelt overtures seem to permit), the eventual impact on the Northern Irish economy could be minimal or even (dare we say it) positive.

How any of these eventualities will impact the property market, if at all, is far from certain. For our part, we are sufficiently confident to continue seeking out future opportunities in Belfast. We advise investors to keep an open mind, read widely, and get in touch with any questions.

Author

Paul Avery

Paul joined us in 2016 to lead our in-house research efforts, producing reports and guidance for clients as well as the strategic market analysis behind our new project launches. His background is in sustainability in the construction sector, and he is currently being trained in property valuation to further bulk up his investment creds.
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